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Ebbers' Severance: $1.5M a Year for Life
Wednesday, May 15, 2002
By Jim Hopkins
USA TODAY

SAN FRANCISCO
Financially troubled WorldCom said Wednesday that it would borrow $2.65 billion to guarantee it has enough cash while negotiating a bigger, longer-term credit line.

The No. 2 long-distance carrier, owner of MCI, also disclosed a severance package it gave to former CEO Bernie Ebbers, who quit last month amid concerns about the company's viability and his debts to it.

WorldCom has been under pressure as investors fear it may have to file for bankruptcy protection and faces a cash crunch that could keep it from paying off debts. The company sought to reassure investors Wednesday. "We certainly think we have liquidity for all periods," said Chief Financial Officer Scott Sullivan.

In a Securities and Exchange Commission filing, WorldCom detailed Ebbers':

• Severance package. He will receive an annual pension of $1.5 million for life. His current wife will get $750,000 annually for life, if she survives him. Ebbers also gets "limited" use of the company's aircraft, plus medical and life insurance benefits and the right to lease office space.

In return, Ebbers promised to be available as a company consultant for five years. Also, Ebbers' WorldCom and MCI stock options vested immediately. Most of them are worthless because WorldCom's stock is trading at far less than Ebbers' strike price, often $20 to $30 a share.

Ebbers' package, although generous in light of what he owes the company, is not unusual, says compensation expert Nell Minow. "I don't think the guy is going to be passing the hat anytime soon," she said.

• Company loans. The former CEO's loans total $408 million -- up from a previously reported $366 million. The higher amount includes $36.5 million WorldCom gave as collateral for a third-party loan to Ebbers. The rest is interest, spokesman Brad Burns says. Ebbers has said he intends to repay the loans.

Also Wednesday, WorldCom named KPMG as its new auditor, replacing embattled Arthur Andersen, its auditor for 13 years. WorldCom said the switch was not a result of any disagreement with Andersen.

WorldCom stock closed at $1.29, up 5 cents.
(USATODAY.comNews Source)
2002 © USA TODAY.

Dan